• UGI USER
  • Mar 09, 2024
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DUBIOUS RESPONSE

Syllabus:

GS 2:

  • Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

Focus:

  • The SBI to delay publication of details of electoral bonds defy belief
Source:- India Today

Electrol Bonds

  • Electoral Bond Scheme is a method of political funding introduced in India.
  • Electoral bonds function as monetary instruments akin to promissory notes.
  • Available for purchase by companies and individuals from the State Bank of India (SBI).
  • Purchased bonds can be donated to political parties.
  • Political parties can encash these bonds only in their designated account.
  • Individuals can buy bonds singly or jointly with others.
  • Launched in 2018, the scheme aims to reform political funding in India.
  • Its primary objective is to enhance transparency in electoral financing.
  • The government considers it a step towards a cashless and digital economy
Electoral Bonds (EBs) Overview:

·   EBs are interest-free bearer bonds or money instruments purchasable by companies and individuals in India from authorized State Bank of India (SBI) branches.

·   Similar to bank notes, EBs are payable to the bearer on demand and carry no interest.

·   Sold in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.

·   Purchased through a KYC-compliant account for political party donations.

·   EBs have a 15-day lifespan for donation transactions.

·   Donor information is not included on the instrument, rendering EBs anonymous.

·   No limit on the quantity of EBs a person or company can acquire.

·   Electoral bond donations are tax-exempt under Sections 80 GG and 80 GGB of the Income Tax Act.

Receiving Funding via Electoral Bonds:

·   Only political parties registered under Section 29A of the Representation of the People Act, 1951, securing at least 1% of votes polled in the last general election, can receive electoral bonds.

·   EBs must be encashed within a specified timeframe by eligible political parties.

·   Encashment must occur through a designated bank account with the authorized bank.

·   Political parties are required to disclose the amount received to the Election Commission.

Supreme Court Verdict on Electoral Bonds

  • SC struck down Electoral Bonds Scheme due to violation of Right to Information.
  • It infringed upon Article 19(1)(a) of the Constitution by allowing anonymous donations, hindering transparency.
  • Economic inequality led to differing political engagement levels, potentially fostering quid pro quo arrangements.
  • The scheme wasn’t proportionally justified to curb black money; it lacked least restrictive methods.
  • Donor privacy doesn’t extend to contributions made for policy influence; it only applies to genuine political support.
  • Unlimited corporate donations, permitted by amending Companies Act, violated fair elections.
  • Amendment to Section 29C of RPA, exempting donations through electoral bonds, was quashed.
  • SBI ordered to cease issuing electoral bonds and share purchase details with ECI.
  • ECI to publish bond purchase details on its website by March 13, 2024.
  • Unused electoral bonds within validity must be returned, with refunds issued to purchasers’ accounts.

Directives and Compliance

  • Immediate Cessation: The State Bank of India (SBI), the sole authorized issuer of electoral bonds, was ordered to stop issuing them immediately.
  • Disclosure Requirements: SBI was mandated to provide details of political party recipients, including purchase dates and denominations, by March 6, aiming for transparency ahead of the elections.

SBI’s Response

  • Request for Extension: SBI requested a deadline extension until the end of June 2024, beyond the expected election date, to comply with the disclosure requirements.
  • Data Reconciliation Challenge: SBI cited difficulties in reconciling two sets of data: purchases and party recipients, complicating the compliance process.

Concerns

  • Electoral Bonds raised concerns regarding contradicting their intended purpose of transparency in election funding.
  • Critics argue anonymity favors the ruling party and limits transparency for the public and opposition.
  • The involvement of a government-owned bank like SBI opens avenues for potential extortion or victimization.
  • The exemption of political parties from disclosing bond donations undermines voter knowledge in a representative democracy.
  • The scheme compromises the right to know, integral to the freedom of expression under Article 19 of the Indian Constitution.
  • Anonymity of electoral bonds doesn’t prevent government access to donor details, potentially disrupting free and fair elections.
  • Removal of donation limits fosters crony capitalism, allowing well-resourced corporations to influence elections, leading to a system characterized by close relationships between business and government – crony capitalism.

Way forward

  • Some suggestions include banning donations from certain entities like foreign citizens or companies.
  • Donation limits could be imposed to prevent undue influence from a few large donors.
  • Examples include contribution limits in the US or reliance on expenditure limits as seen in the UK.
  • Expenditure limits aim to prevent a financial arms race in politics.
  • For instance, in the UK, parties are restricted to spending around Euro 30,000 per seat.
  • However, attempts to impose such limits face legal hurdles, as seen in the US.
  • Public funds could be allocated based on predetermined criteria like past election performance or membership fees.
  • Germany’s system includes special state funding for party-affiliated policy think tanks.
  • Innovative approaches like “democracy vouchers” allow voters to allocate public funds to candidates of their choice.
  • While transparency is crucial, donor anonymity may protect against retaliation or extortion.
  • Striking a balance between transparency and anonymity is challenging but necessary.
  • Chile’s “reserved contributions” system aimed for complete donor anonymity, but scandals revealed coordination between politicians and donors.
  • Many jurisdictions opt for anonymity for small donors while requiring disclosure for large donations.
  • This approach aims to protect small donors while promoting transparency for significant contributions.
  • Creating a National Election Fund could eliminate concerns about donor reprisals.
  • Funds could be allocated based on electoral performance, reducing the influence of individual donors.
Indrajit Gupta Committee (1998):

·   Supported state funding of elections to level the playing field for parties with limited financial resources.

·   Recommended limitations such as allocating funds only to national and state parties with allotted symbols.

·   Proposed initial provision of in-kind state funding, offering facilities to recognized political parties and their candidates.

·   Recognized economic constraints and suggested partial rather than full state funding.

Election Commission’s Recommendations (2004):

·   Emphasized the importance of political parties publishing their accounts annually for public scrutiny.

·   Advocated for audited accounts to ensure accuracy, with auditing performed by Comptroller and Auditor General-approved firms.

Law Commission (1999):

·   Considered total state funding of elections desirable under the condition of banning funds from other sources.

·   Proposed amending the Representation of the People Act, 1951, to introduce section 78A for maintenance, audit, and publication of political party accounts, with penalties for non-compliance.

Source:

https://epaper.thehindu.com/reader

Mains Practice Question:

“Recently, the Supreme Court of India struck down the Electoral Bond scheme as unconstitutional, citing violations of the right to information under Article 19(1)(a) of the Constitution. Analyze the implications of this verdict on political funding transparency in India. Discuss the challenges and prospects of ensuring transparency in political donations in the light of this judgment.